Does job retraining work?

Yesterday the NYT had an assiduously reported piece about job retraining programs which left a pretty bleak impression about how useful they are:

Hundreds of thousands of Americans have enrolled in federally financed training programs in recent years, only to remain out of work. That has intensified skepticism about training as a cure for unemployment.

It seems there are two big problems. First, many job retraining programs try to boost workers’ skills in a generic way—learn Excel, write a better resumé—without actually talking to local employers to find out what they need. Second, when companies aren’t hiring because of slack demand, even the best-trained workers can’t land jobs because there are no jobs.

The conclusion, then, is that job retraining is a wash. I would argue for a different conclusion: that we’re expecting the wrong thing out of such programs.

There is, for instance, evidence that focused, hands-on retraining programs work when the economy isn’t in such a slump. Consider this new, multi-year study of three non-profits that work with companies within specific sectors, such as manufacturing, medical billing and computer repair. The program evaluator Public/Private Ventures tracked generally low-income/low-skill workers who went through one of the three programs, as well as a control group that didn’t. After two years, the group that had the training earned 18%—or $4,500—more a year. People in the group that had training were also more likely to find steadier employment and to hold a job with benefits.

Now, that study ran through September 2008, which means the results weren’t observed during a recession. As part of the stimulus package, the federal government earmarked some $1.4 billion for job training programs in 2009 and 2010. The results of this study don’t necessarily imply that that money will get people back to work.

But, contrary to the tone of the NYT article, I don’t think that necessarily suggests the money has been ill spent. After all, eventually demand for products and services will pick back up, and if we’ve got a better trained workforce rearing to go, then the economy will be better off.

That’s because even though unemployment is high right now, and there may be plenty of qualified (or overqualified) candidates for the jobs that do open up, we’ve still got long-term structural problems with workforce preparedness.

Earlier this year, Deloitte, The Manufacturing Institute and Oracle released an update of a 2005 report about America’s skills gap. Manufacturing companies were asked about “the current availability of qualified workers in specified workforce segments, and to describe anticipated changes to that availability over the next two to three years.” Among the findings: 63% of life science/medical device companies report “moderate to serious shortages,” as do 63% of aerospace/defense companies and 45% of energy/natural resources firms.

Broken down by skill category, what’s happening is quite apparent. While only 7% of companies report a moderate to serious shortage of unskilled production workers, 51% report a shortage of skilled production workers, and 36% report a shortage of scientists and engineers. That might account for one of the NYT‘s rare success stories, a man who lost his job as a machinery operator at a medical device company. He searched for work for a year, but potential employers kept telling him that they wanted someone who could program, not just operate, the sort of machinery he used to work on. After taking courses at a technical college in order to be able to do that, he landed a job.

Now, one might argue that job retraining is fine and good, but nonetheless not what we need right now, since it’s not a quick fix to the unemployment crisis. I’d counter that there are no quick fixes, and at least job retraining keeps us on task.

Training is also helpful on a psychological level. When someone is unemployed and cannot get a new job, often they become depressed and pessimistic about their value in the workforce. This isn’t only bad on a personal level, but makes the economy worse off, since this psychology makes it even harder for the labor market to recover and be as productive… The reality is that the people who are participating in these training courses are better off sitting in a classroom for an hour or two a day, then sitting on their sofas watching “The Price is Right” or reruns of “Charmed.” Since they can’t get a job, they might as well do something productive with their time. And the federal money being spent on this effort is mostly pure jobs stimulus anyway, since it creates work for course instructors, as states layoff teachers.

Does that immediately drive down the unemployment rate? No. But it does at least help point us in the right direction.